Mike Ashley bid for Mulberry causes rift with main shareholder

Tensions have escalated at Mulberry as its two biggest shareholders lock horns over the future ownership of the struggling British luxury brand.
Mulberry’s board said on Monday that it would consider an improved offer from Frasers, despite attempts by Challice over the weekend to fend off such bids.
Shares in the luxury goods seller rose 13p, or 11.5 per cent, to close at 125½p after its board said that it was “working with advisers to consider the company’s position and will provide a further announcement in due course”.
The dispute raises fresh questions about the company’s direction and potential changes in control.
Challice, which has a 56.1 per cent stake and is controlled by the Singaporean billionaire Ong Beng Seng and his wife Christina Ong, has called on Mike Ashley’s Frasers Group to abandon its takeover interest.
It said on Sunday that it had “no interest” in selling its holding to Frasers and that the advances were an unwanted “distraction”.
Frasers Group, which owns Sports Direct and House of Fraser and has a 36.8 per cent stake in Mulberry, had raised its offer to 150p per share on Friday, days after its original takeover approach was rebuffed.
The Mulberry board has a fiduciary duty to consider all options as it attempts to turn around the brand. It can recommend the offer but would need the approval of shareholders, including Challice.
Challice confirmed on Sunday that it had no intention of accepting an offer, adding that it was an “inopportune time for Mulberry to be sold and [it] particularly regrets the distraction that the possible offer is bringing to the company and its management team at this time”.
Analysts have suggested, however, that Ashley was likely to fight for the business.
Frasers is known for its acquisitiveness and willingness to enter into boardroom battles to wrest control of companies. It has previously had prominent battles with rivals such as Debenhams and House of Fraser.
In the case of Debenhams, where it had a stake of about 30 per cent, the group launched several takeover bids and financial rescue attempts. Despite holding a significant stake in the retailer, the group, then known as Sports Direct, faced resistance from Debenhams’ creditors and other institutional shareholders. They instead preferred a restructuring plan that excluded Sports Direct’s influence.
Debenhams’ creditors eventually took control of the company through a pre-pack administration, effectively wiping out Sports Direct’s stake.
Analysts said that Frasers could only overcome opposition to its Mulberry approach by offering a price that other shareholders could not refuse.
A source close to the situation said: “Ashley knew there was a majority shareholder when he bought into Mulberry, so he cannot just assume they will change their position on his request. The interesting thing is what will happen next as Mulberry has to consider [the bid].”
Under City takeover rules, Frasers has a deadline of 5pm on October 28 to announce a firm intention to make an offer or walk away.
Frasers’ takeover interest came after Mulberry said it needed to raise cash. The brand fell to a £34 million pre-tax loss in the year to the end of March, compared with a £13 million profit the previous year, with sales down by 4 per cent to £153 million.
The Bath-based leather goods company, which was founded in 1971 and is best known for its Bayswater handbags, has said that the appointment of Andrea Baldo as chief executive in July, as well as an emergency £10.75 million share placing, provided a “solid platform to execute a turnaround”.